PBLT hit with RM80m losses

KUALA LUMPUR: The government construction company Pembinaan BLT Sdn Bhd (PBLT), was generally satisfactory in terms of financial performance and management and corporate management, according to the Auditor-General's Report 2010. But the 99.99%-owned subsidiary of the Ministry of Finance (MoF) Inc had to bear losses of RM80 million in consultation fees for postponed projects.

The report said PBLT made RM0.97 million in 2009 compared with RM1.59 million in 2008. It also found that PBLT's general and management expenditure had increased from RM490,000 in 2008 to RM3.03 million in 2009.

While the company faced a cash flow deficit of RM1.22 billion from operation activities in 2009, it had cash and cash equivalents of RM2.31 billion as at end.

In January this year, The Edge Financial Daily reported that PBLT was going to the market to raise RM10 billion in sukuk in several tranches to finance its development and financing costs, operating expenses as well as to refinance its short-term borrowings.

The first tranche of a RM1 billion sukuk was targeted to be issued by the first quarter of this year. PBLT was to establish a 25-year Islamic medium-term notes (IMTNs) programme through its wholly-owned subsidiary Aman Sukuk Bhd. The sukuk, which is not government guaranteed, has been given a AAA rating by Malaysian Rating Corp Bhd (MARC).

PBLT was incorporated in 2005 to build police quarters, police stations and training grounds nationwide for the Royal Malaysian Police.

However, the AG's Report also noted that there were several weaknesses such as the late signing of the project development and management agreement, postponed projects due to the economic downturn and rise in raw material costs or cancellations due to unsuitability of the site, and higher contract prices that were approved by the MoF in comparison to the amount that was approved by the PBLT price negotiation committee.

While the MoF had on May 30, 2008 approved 129 projects costing RM9.24 billion, in October the same year, it limited the projects to only 74.

"The changes were due to the increase in project cost due to higher raw material prices, additional project work scope and instructions to carry out projects through direct negotiation.

"Due to the changes in project planning, PBLT and the government had to bear RM80 million in consultation fees for 44 postponed projects and RM171,672 for 11 cancelled projects. As at May 2011, PBLT had paid out RM59.26 million to the affected consultants," said the report.

The report also highlighted several projects where the MoF had increased the project cost by between RM2 million and RM60 million compared with the price suggested by the PBLT price negotiation committee.

"The audit could not determine a clear basis for the approval of the increased cost but based on analysis of the information provided by the Finance Ministry, it is found that the increase in price was due to requests from contractors as a result of increases in petrol, steel and construction material prices," said the report.

Concerning the National Feedlot Centre, the audit conducted between January and March this year showed that the centre had failed to launch an Entrepreneur Development Programme (EDP), which was to establish 130 satellite farm operators while the main operator, Lambert, Agricultural Trade (M) Sdn Bhd, had withdrawn from the project in 2008 after failing to get support from partner companies for the supply of cattle.

The AG's Report also said that based on the project agreement, National Feedlot Corp Sdn Bhd (NFCorp) was supposed to establish the 130 satellite farm operators and produce a standard operating procedure for the operators to manage the feedlot cattle.

"However, as at Dec 31, 2010, NFCorp had yet to carry out the EDP and the standard operating procedure has yet to be finalised," said the report.

The audit also found that only 3,289 cattle were produced instead of the targeted 8,000 for 2010. The project had targeted to produce 60,000 cattle annually for consumption by 2015.

In December 2007, The Edge Financial Daily reported that NFCorp was granted a RM250 million soft loan from the government to facilitate its role in transforming the Malaysian cattle and beef industry with a target of meeting 40% of the local beef demand by 2010.

NFC, which is in the list of High Impact Projects under the Ninth Malaysia Plan, was awarded the loan facility for 20 years at 2% annual interest.

The company is made up of private-public partnerships where the government holds a golden share to ensure that policies, directions and sustainability are met.

In 2007, NFCorp CEO Izran Salleh had said in an interview: "This is a high impact project. We report to the Ministry of Agriculture, Economic Planning Unit and Ministry of Finance." He added that the company would have private equity of RM25 million on top of the loan from the government.

The report also said a total of RM134.72 million of the soft loan has been channelled to NFCorp while the balance RM115.28 million has been held back as the MoF had postponed the project until a viability and business model project has been carried out by UPM Holdings. The findings have been submitted to the ministry and are being studied.